The Relationship Between Domestic and Outward Foreign Direct Investment : The Role of Industry-Specific Effects

• Previous research has been inconclusive as regards the effect of outward foreign direct investment (FDI) on domestic investments. In this article, we show that this inconclusiveness can be explained at a disaggregated level as a function of the way industries are organized. Based on a simple theoretical framework including monitoring and trade costs, we argue that a complementary relationship can be expected to prevail in vertically integrated industries, whereas a substitutionary relationship can be expected in horizontally organized production. The empirical analysis confirms a significant difference between the two categories of industry as regards the impact of outward FDI on domestic investment. The results may thus have profound policy implications.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Nyckelord

FDI

gross domestic investment

industry-specific effects

Business and economics

Ekonomi

TECHNOLOGY

industry-specific effects

FDI

gross domestic investment

Publikations- och innehållstyp

ref (ämneskategori)

art (ämneskategori)